Cash flow is the lifeblood of any business, especially new start ups.
You have done the business plan, sweated over the budgets and are in
business!
Now what do you do? sit back and wait for customers? as cash disappears out the door.
Monitoring cash flow is VITAL for your survival; you need to monitor every expenditure and revenue.
In my twenty five odd years business experience your cash flow forecast
and budget very rarely matches up to the everyday reality of business,
at the end of the day you are making assumptions about what income you
MAY generate and what expense you will occur. Sure you have fixed
costs, rent, rates, wages etc, but your variable costs are just that,
very variable!
What do you do when sales drop, no amount of advertising will bring
people to buy if they don't want to, Is your business subject to
seasonal variations? What if you have an abnormally harsh winter or hot
summer, will it affect your revenue?
Do you import or use postal services? , Is your competitor being
aggressive with pricing, what if there is industrial action? That stops
you delivering orders or receiving stock/payment?
Interest rate rises will affect your loans and overdraft, not only that
they affect the economy and the pound in the consumers pocket.
Disposable income consumers have to spend. If you import, currency
fluctuations can have an impact on your costs and ultimately profits.
Obviously you can't cover all contingencies, but you can be realistic.
Suppose you budget £10,000 to start your business and get off the
ground is that really enough? Experts agree whatever you budget triple
it to be safe. If you think you need £10k you need £30, it's better to
have cash at the outset rather than running out half way down the line.
Do a spring clean every six months or even three. Look at all your
overheads can they be reduced? Look at suppliers; cleaning services,
transport, utilities, leasing arrangements, advertising, phone bills
how much can you save? A few pounds here and there can add up to a few
hundred or even thousand on your bottom line.
Dead stock is useless, its money sitting idle. If times are tough sell!
Don't give it away, get a return on your outlay, but more importantly
generate needed cash! by turning the dead stock over to keep the
business rolling.
Stay on the ball and you may be one of the lucky ones that stay's in business!
